Easing restrictions on visas doesn’t help any high-tech workers

The economy may be hovering between a hard landing and a soft one. The landscape may be littered with dead dot-coms. Share prices on the Nasdaq may have fallen by nearly half since last March. Silicon Valley’s torrid pace of employment growth may have slowed substantially, and high tech workers may be getting deluged with pink slips.

But one thing remains constant. Invited by President Bush to an economic summit last month, the CEOs of America’s information technology firms made the same demand they lobbied for successfully in 1998 and again this past October — give us more temporary foreign workers.

Congress raised the number of temporary visas for college-educated workers (H-1B visas) to 115,000 in 1998. In October 2000 that number was increased further, to 195,000 a year over the next three years — more than triple the number Congress envisioned a decade ago, when it established the H-1B program. Yet the industry claims it needs more. High tech employers would like to see the cap on the number of H-1B workers lifted altogether.

While few well-informed observers would want to abolish the H-1B program, it is time to pause and assess the effects of its rapid expansion on U.S. and foreign workers.

Congress also thought an assessment was needed. In 1998, it commissioned a study of the IT workforce, reflecting the frustration of policymakers with the lack of information about information technology (IT) workers and the impact of the H-1B program.

The study was made available to Congress and the American public in a report, Building a Workforce for the Information Economy, released on October 25, 2000. Some of its findings may surprise you.

The study found that labor markets for IT workers were tight in the last half of the 1990s — as they were for many types of skilled workers in the booming economy of those years. But, even before the recent round of layoffs of high tech workers, there was no evidence of an overall shortage. Indeed, in sharp contrast to what would be expected if there were a shortage of computer engineering and software professionals, wages in these occupations grew only a little more rapidly than wages of other highly educated workers.

Rising compensation is the means by which the market signals young people that opportunities are good in a field, and they should enter it. With wages of computer professionals rising somewhat more rapidly than those of other professionals, the decline in the number of students in computer programs has been reversed. In the last few years, the number of computer science and engineering majors has begun to increase.

Still, the high-tech CEOs who met with President Bush complained that they can’t find all the workers they need, and lamented that not enough young Americans were studying to be computer specialists. But if they are having so much trouble recruiting, one might wonder why wages aren’t rising even faster.

The growing number of H-1B workers may be part of the answer. There are currently about 255,000 H-1B workers employed in computer specialty occupations in the U.S. This is about 10 percent of all computer professionals – a large enough fraction to depress wage growth for existing employees and discourage many young Americans from considering computer occupations.

To see why this is so, consider what would happen to the price of oil if OPEC were to increase production by 10%. Prices at the pump would fall — and many people would abandon ideas of driving smaller cars or turning their thermostats down to conserve energy. Lower energy prices discourage conservation efforts despite exhortations to Americans to do better.

The recent increase in the number of H-1Bs to 195,000 means the number of temporary “non-immigrant” workers in the U.S. will double from 350,000 in 1999 to 700,000 in 2002. Nearly 60 percent are IT workers, further exacerbating the wage effects. At the beginning of the 1990s, H-1B workers made up less than 7% of the increase in the IT labor force. In 1999, they made up more than half the increase, according to a report from the Institute for the Study of International Migration.

Fixing the high tech hiring problem by rapidly raising the number of H-1B workers raises other issues as well. The study found that, as recently as 1986, women made up 40% of the skilled IT workforce. Today, women’s share of skilled IT jobs has fallen to just 29% of the total. Meanwhile, African Americans account for only 4 percent of this core IT workforce; Hispanics, only 3%, suggesting that significant segments of society are not finding their place in this key industry.

Increasing the supply of American IT workers is not going to be easy — and for a very surprising reason. One of the more unexpected findings is that the bottleneck in increasing the number of young people with computer skills is a shortage of instructors, professors, computers, and suitable classroom facilities in high schools, community colleges, and universities — not a lack of interested and qualified students.

Strengthening math and science education, with a special effort to reach out to those who have been left behind, is important. But it’s not enough. The U.S. needs to make major investments in instructional infrastructure if it is serious about increasing the number of computer science majors.

And, finally, what of the temporary H-1B visa workers themselves?

The number of foreign workers who can enter this country on a temporary basis to fill jobs requiring a college degree has increased dramatically. But the rules on permanent immigration have been left unchanged. This combination of action and inaction means that there may be hard times ahead for newly recruited foreign workers.

With no change in U.S. permanent immigration law, the increase in H-1B visas means that many newly recruited foreign workers will bump up against quotas on permanent employment-related immigration. These limits on permanent immigration were set back when the number of H-1B workers entering the U.S. each year was capped at 65,000.

As the number of workers on temporary visas rises, the processing backlog for permanent immigrant status will grow. The unlucky temporary workers will experience long delays in becoming permanent immigrants. The even unluckier ones will face disruption in their personal and professional lives when they are forced to leave this country.

And one of the clearest findings of the report has gotten surprisingly little attention: increasing the number of temporary H-1B visa workers without any corresponding change in the permanent immigration system will cause the system to malfunction.

The U.S. has always been a country of immigration, and diversity remains one of its strengths. A case can be made for continuing to admit workers on H-1B visas to meet the unique demands that arise for computer and other professional specialists — but not for unbridled expansion of the program. Indeed, the study found that past decisions about the number of H-1B visa workers to admit has been purely political. No scientific basis for determining the appropri
ate number exists.

Before we entertain the possibility of increasing the number of temporary foreign workers again, we owe it to everyone affected to examine the long-term consequences of continuing to expand the program.

Eileen Appelbaum is the research director at the Economic Policy Institute in Washington, D.C. Cecilia Rouse is associate professor of economics and public affairs at Princeton University. Both contributed to the report, Building a Workforce for the Information Economy.